Clear Eyed Capitalist

Archive for December, 2009

I attended the Seattle Economics Council’s December lunch at Ivars on the waterfront. I must say, these folks organize one of the best speaker series in town IMHO. This month they hosted Mark Costello, a lender relations specialist from the local SBA office. Mark’s talk was my first introduction to the SBA Office of Advocacy – a research group within the SBA. He pulled a fascinating array of data for us about the state of small business.

Some key myth busting – the business failure rate is not as dire as rumor would have it: 70% of businesses survive the first 2 years and 50% are still in business after 5 years. It was not clear how that number is impacted by businesses that are acquired, I’ll guess they show up as no longer in business. I read a paper in the past that made the point that this data only looks at who is still in business and that a closed business is not necessarily a failed business. Back to the data: small businesses have created 65% of new jobs since 1993 and employ 60.2 million people – 50% of total US employment.

Wondering how to structure your social enterprise? Wonder what an L3C is and should you be for profit, nonprofit, a hybrid and if so which should own which? Spend a day noodling over such issues with a national tour organized by Criterion Ventures. I worked with Joy Anderson and Jackie Vanderbrug while at Good Capital and they’re definitely “right people”.

Structure Lab is an easy-to-engage, day-long process that helps social ventures take advantage of innovations in capital formation, revenue streams, corporate forms, and independent regulation to promote and protect values and mission.

With support from the David and Lucile Packard Foundation, Criterion designed Structure Lab to explore the range of legal structures available for your venture, whether it’s still on the drawing board or poised for growth. Come create the optimal legal structure for your social venture to thrive.

As a board member I’m always interested in what best practices are. We’ve had some discussions on one board that has two issues in my mind: one, how much we should keep in reserves to balance prudent management with not seeming too flush for more funding; two, being thoughtful about balancing perceived high overhead expenses with good investment in capacity.

I was in a funder meeting yesterday and the speaker made a reference to less than 30% of nonprofits meeting a standard of 6 months expenses in operating reserve. She referenced the Nonprofit Finance Fund as the source of that standard but what I actually see is the stat that 31% did not have 3 months of expenses. So I take it that a nonprofit should have at least 3 months in reserves, and that someone from Grantmakers For Effective Organizations has it in her head that 6 months is a good idea.